For more than a decade, employees in the District of Columbia's Office of Tax and Revenue cashed millions of dollars' worth of property tax refunds made out to fake corporate accounts, and then spent the money on real estate, cars, clothing and luxury goods, the U.S. Department of Justice charged in November.

And much of that happened under the nose of a $100 million tax system that became fully operational in 2002 after three years of development.

Ten people, including two D.C. workers, have been arrested thus far as part of an ongoing investigation by the DOJ and local authorities. Federal prosecutors say that the employees had developed a complex scheme for cutting checks averaging $388,000 each to sham accounts. One employee allegedly spent about $1.4 million at Neiman Marcus starting in September 2000. Court documents point to the theft of at least $20 million and suggest that the actual total may be even higher.

While the alleged thefts were taking place, IT contractor Accenture Ltd. built the new tax system for the D.C. government. The technology was designed to modernize tax operations by combining previously separate income, property and sales tax systems and creating a single database for tax information. The Integrated Tax System (ITS) also includes CRM software and gives taxpayers access to online services.

The new system was built to do a lot of things — except, apparently, prevent the theft of millions of dollars by rogue insiders.

The ITS didn't flag the allegedly fraudulent activities because they happened outside of the system, according to D.C. and Accenture officials. The alleged perpetrators "did not go anywhere near the ITS," said Mike Teller, CIO in the district's Office of the Chief Financial Officer. "As far as we know, everything that they did, they did because they went around the system."

Echoing Teller's words, Accenture spokesman Peter Soh said: "The perpetrators did not use our tax system to commit this fraud. Our understanding is that they used other means." He added that Accenture hasn't been contacted by the investigators in the case.

But that begs the question of why a key business process such as writing tax refund checks could even be completed outside of the ITS, which was cited in 2002 as a national role model for tax systems by the Federation of Tax Administrators. The FTA named the system as its Outstanding Technology Application for State Administrators that year.

Harley Duncan, the FTA's executive director, said he thinks that there likely are a few places in the tax refund process where a "fully functional" system would have flagged the alleged fraud scheme. For instance, he said that he would have expected the ITS to check parameters such as the number of refunds being issued, who they were paid to and where the approvals took place.